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SQI Diagnostics acquires Scienion AG

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TORONTO—In a move that takes square aim at the diagnostictests market, SQI Diagnostics Inc. has agreed to acquire all of the shares ofScienion AG, a German-based microarray manufacturing equipment and microarrayprint and development services company.
Scienion, located in Dortmund and Berlin, develops andcommercializes microarray printing and production systems and provides contractmicroarray print and development services for the life sciences industry. Anearly objective of the new combined entity will be to "accelerate thecommercialization of our combined pipeline of custom microarray diagnosticproducts through the use of Scienion's microarray print expertise, arrayerequipment and experience with complete print solutions with SQI's automatedmicroarray platforms," according to a press release released by the companies.
In addition, Scienion's equipment sales will benefit fromSQI's strength in North America, while Scienion's sales and engineering supportwill be used to market SQI's suite of diagnostic products and services inEurope. SQI will pay $15.6 million in cash for Scienion and issue 735,294common shares "in the capital of SQI." The closing of the transaction issubject to a number of customary closing conditions and regulatory approvals,and is subject to financing.
In its preliminary short-form prospectus, SQI states thatits SQiDworks is the "only FDA-cleared, fully-automated, microarray system andmultiplexing solution in our target markets, which can perform qualitative orquantitative testing for multiple biomarkers simultaneously." The company addsthat it is also developing a fully automated benchtop diagnostic platform and asmall, semi-automated system.
SQI plans to continue to develop and seek regulatoryapproval for additional diagnostic tests, based on the assumption thatexpanding its test menu will drive adoption of its platform and products. Theaddition of Scienion's "industry-leading print technologies" will enable thenew entity to "become a leader in sales of end-to-end microarray-baseddiagnostic systems, microarray printing and assay development services," thecompany states.
At stake is a global immunoassay diagnostic test market thatSQI estimates will reach $10.3 billion in 2012. Of that, SQI is strategicallyfocusing on a "directly addressable market of approximately $4.5 billion, whichincludes immunological tests for autoimmune disease, infectious disease andallergenecity." These markets are estimated to be $1.5 billion, $2.4 billionand $0.6 billion, respectively. SQI is targeting these markets because multiplebiomarkers are measured to aid in the diagnosis and therapeutic monitoring ofthese diseases, these markets are comprised of large, high-volume facilitieswhich are typically underserved by fully automated, high-throughput,multiplexed systems, and the tests usually qualify for reimbursement by publicand private insurers in the United States, Canada and the European Union.
First up will be the autoimmune segment, which SQI sees asthe low hanging fruit for a number of reasons. The company notes that only 10disease states command most of the blood testing revenues for the entireautoimmune test segment and that the most common tests for autoimmune diseasescurrently evaluate about 70 biomarkers or seven per disease. In addition, thesetests are generally run at high volumes at larger test facilities and inbatches—not run on a one-off basis.
Finally, the company notes that "each of the autoimmunediagnostic tests we are developing has predicate technologies with FDAclearance on older, single biomarker, manual titer plate technology that weintend to replace, and regulatory clearance for the majority of autoimmuneassays is through the FDA 510(k) process, which is well established."

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